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Time-varying saving–investment relationship and the Feldstein–Horioka puzzle

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  • Ma, Wei
  • Li, Haiqi

Abstract

Numerous studies have been devoted to the Feldstein–Horioka puzzle. However, no consensus has been reached in the literature. This paper examines the dynamic saving–investment relationship by using a time varying cointegration model. The saving-retention coefficients are found to be high for developed economies, but low for less developed economies, which could be explained by the difference of the long-run solvency constraint between developed and less developed economies. While more evidence is found for time-varying cointegration using quarterly data, the magnitudes of saving retention coefficients have no substantial difference from those of annual data.

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  • Ma, Wei & Li, Haiqi, 2016. "Time-varying saving–investment relationship and the Feldstein–Horioka puzzle," Economic Modelling, Elsevier, vol. 53(C), pages 166-178.
    • Handle: RePEc:eee:ecmode:v:53:y:2016:i:c:p:166-178
    DOI: 10.1016/j.econmod.2015.11.013
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